"If the instructions are not clear,
or the explanation not trusted, it
is the general’s fault. If the instructions were clearly given
and explained, it is the fault of the officer." Sun
-Tzu
Vocabulary
was a matter of life and death to the Chinese soldier; if an officer
failed to obey orders, was decapitated. Your legal vocabulary is
equally important to real estate.
Study
the words of divorce to facilitate communication with your realtor, title companies
and the courts. Your legal vocabulary will give you a tactical
advantage.
| A | B | C | D | E | F | G | H | I | J | K | L | M | N | O | P | Q | R | S | T | U | V | W | X | Y | Z |
A
acceleration clause: A clause
in your mortgage which allows the lender to demand payment of the outstanding
loan balance for various reasons. The most common reasons for accelerating
a loan are if the borrower defaults on the loan or transfers title to another
individual without informing the lender.
adjustable-rate mortgage (ARM): A
mortgage in which the interest changes periodically, according to corresponding
fluctuations
in an index. All ARMs are tied to indexes.
adjustment date: The date the interest
rate changes on an adjustable-rate mortgage
amortization: The loan payment consists
of a portion which will be applied to pay the accruing interest on a loan,
with the remainder being applied to the principal. Over time, the interest
portion decreases as the loan balance decreases, and the amount applied to
principal increases so that the loan is paid off (amortized) in the specified
time.
amortization schedule: A table which
shows how much of each payment will be applied toward principal and how much
toward interest over the life of the loan. It also shows the gradual decrease
of the loan balance until it reaches zero.
annual percentage rate (APR): This
is not the note rate on your loan. It is a value created according to a government
formula intended to reflect the true annual cost of borrowing, expressed
as a percentage. It works sort of like this, but not exactly, so only use
this
as a guideline: deduct the closing costs from your loan amount, then using
your actual loan payment, calculate what the interest rate would be on this
amount instead of your actual loan amount. You will come up with a number
close to the APR. Because you are using the same payment on a smaller amount,
the
APR is always higher than the actual not rate on your loan.
application: The form used to apply
for a mortgage loan, containing information about a borrower’s income, savings,
assets, debts, and more.
appraisal: A written justification
of the price paid for a property, primarily based on an analysis of comparable
sales of similar homes nearby.
appraised value: An opinion of a
property's fair market value, based on an appraiser's knowledge, experience,
and analysis
of the property. Since an appraisal is based primarily on comparable sales,
and the most recent sale is the one on the property in question, the appraisal
usually comes out at the purchase price.
appraiser: An individual qualified
by education, training, and experience to estimate the value of real property
and personal property. Although some appraisers work directly for mortgage
lenders, most are independent.
appreciation: The increase in the
value of a property due to changes in market conditions, inflation, or other
causes.
assessed value: The valuation placed
on property by a public tax assessor for purposes of taxation.
assessment: The placing of a value
on property for the purpose of taxation.
assessor: A public official who establishes
the value of a property for taxation purposes.
asset: Items of value owned by an
individual. Assets that can be quickly converted into cash are considered "liquid assets." These
include bank accounts, stocks, bonds, mutual funds, and so on. Other assets
include real estate, personal property, and debts owed to an individual by
others.
assignment: When ownership of your
mortgage is transferred from one company or individual to another, it is
called an assignment.
assumable mortgage: A mortgage that
can be assumed by the buyer when a home is sold. Usually, the borrower must "qualify" in
order to assume the loan.
assumption: The term applied when
a buyer assumes the seller’s mortgage.
| A | B | C | D | E | F | G | H | I | J | K | L | M | N | O | P | Q | R | S | T | U | V | W | X | Y | Z |
B
balloon mortgage: A mortgage loan that requires the remaining principal
balance be paid at a specific point in time. For example, a loan may be amortized
as if it would be paid over a thirty year period, but requires that at the
end of the tenth year the entire remaining balance must be paid.
balloon payment: The final lump sum
payment that is due at the termination of a balloon mortgage.
bankruptcy: By filing in federal
bankruptcy court, an individual or individuals can restructure or relieve
themselves of
debts and liabilities. Bankruptcies are of various types, but the most common
for an individual seem to be a "Chapter 7 No Asset" bankruptcy which relieves the borrower of most types of debts. A borrower cannot usually qualify for an "A" paper
loan for a period of two years after the bankruptcy has been discharged and
requires the re-establishment of an ability to repay debt.
bill of sale: A written document
that transfers title to personal property. For example, when selling an automobile
to acquire funds which will be used as a source of down payment or for closing
costs, the lender will usually require the bill of sale (in addition to other
items) to help document this source of funds.
biweekly mortgage: A mortgage in
which you make payments every two weeks instead of once a month. The basic
result
is that instead of making twelve monthly payments during the year, you make
thirteen. The extra payment reduces the principal, substantially reducing
the time it takes to pay off a thirty year mortgage. Note: there are independent
companies that encourage you to set up bi-weekly payment schedules with them
on your thirty year mortgage. They charge a set-up fee and a transfer fee
for
every payment. Your funds are deposited into a trust account from which your
monthly payment is then made, and the excess funds then remain in the trust
account until enough has accrued to make the additional payment which will
then be paid to reduce your principle. You could save money by doing the
same thing yourself, plus you have to have faith that once you transfer money
to
them that they will actually transfer your funds to your lender.
bond market: Usually refers to the
daily buying and selling of thirty year treasury bonds. Lenders follow this
market intensely because as the yields of bonds go up and down, fixed rate
mortgages do approximately the same thing. The same factors that affect the
Treasury Bond market also affect mortgage rates at the same time. That is
why rates change daily, and in a volatile market can and do change during
the day
as well.
bridge loan: Not used much anymore,
bridge loans are obtained by those who have not yet sold their previous property,
but must close on a purchase property. The bridge loan becomes the source
of their funds for the down payment. One reason for their fall from favor
is that
there are more and more second mortgage lenders now that will lend at a high
loan to value. In addition, sellers often prefer to accept offers from buyers
who have already sold their property.
broker: Broker has several meanings
in different situations. Most Realtors are "agents" who work under a "broker." Some
agents are brokers as well, either working form themselves or under another
broker. In the mortgage industry, broker usually refers to a company or individual
that
does not lend the money for the loans themselves, but broker loans to larger
lenders or investors. (See the Home Loan Library that discusses the different
types of lenders). As a normal definition, a broker is anyone who acts as
an agent, bringing two parties together for any type of transaction and earns
a
fee for doing so.
buydown: Usually refers to a fixed
rate mortgage where the interest rate is "bought down" for a temporary period, usually one to three years. After that time and for the remainder of the term, the borrower’s payment is calculated at the note rate. In order to buy down the initial rate for the temporary payment, a lump sum is paid and held in an account used to supplement the borrower’s monthly payment. These funds usually come from the seller (or some other source) as a financial incentive to induce someone to buy their property. A "lender funded buydown" is when the lender pays the initial lump sum. They can accomplish this because the note rate on the loan (after the buydown adjustments) will be higher than the current market rate. One reason for doing this is because the borrower may get to "qualify" at
the start rate and can qualify for a higher loan amount. Another reason is
that a borrower may expect his earnings to go up substantially in the near
future,
but wants a lower payment right now.
| A | B | C | D | E | F | G | H | I | J | K | L | M | N | O | P | Q | R | S | T | U | V | W | X | Y | Z |
C
call option: Similar to the
acceleration clause.
cap: Adjustable Rate Mortgages have
fluctuating interest rates, but those fluctuations are usually limited to
a certain amount.
Those limitations may apply to how much the loan may adjust over a six month
period, an annual period, and over the life of the loan, and are referred
to as "caps." Some ARMs, although they may have a life cap, allow
the interest rate to fluctuate freely, but require a certain minimum payment
which
can change once a year. There is a limit on how much that payment can change
each year, and that limit is also referred to as a cap.
cash-out refinance: When a borrower
refinances his mortgage at a higher amount than the current loan balance
with the intention
of pulling out money for personal use, it is referred to as a "cash
out refinance."
certificate of deposit: A time deposit
held in a bank which pays a certain amount of interest to the depositor.
certificate of deposit index: One
of the indexes used for determining interest rate changes on some adjustable
rate
mortgages. It is an average of what banks are paying on certificates of deposit.
Certificate of Eligibility: A document
issued by the Veterans Administration that certifies a veteran’s eligibility
for a VA loan.
Certificate of Reasonable Value (CRV): Once
the appraisal has been performed on a property being bought with a VA loan,
the Veterans Administration issues a CRV.
chain of title: An analysis of the
transfers of title to a piece of property over the years.
clear title: A title that is free
of liens or legal questions as to ownership of the property.
closing: This has different meanings
in different states. In some states a real estate transaction is not consider "closed" until the documents record at the local recorders office. In others, the "closing" is
a meeting where all of the documents are signed and money changes hands.
closing costs: Closing costs are
separated into what are called "non-recurring closing costs" and "pre-paid items." Non-recurring closing costs are any items which are paid just once as a result of buying the property or obtaining a loan. "Pre-paids" are
items which recur over time, such as property taxes and homeowners insurance.
A lender makes an attempt to estimate the amount of non-recurring closing
costs and prepaid items on the Good Faith Estimate which they must issue
to the borrower
within three days of receiving a home loan application.
closing statement: See Settlement
Statement.
cloud on title: Any conditions revealed
by a title search that adversely affect the title to real estate. Usually
clouds on title cannot be removed except by deed, release, or court action.
co-borrower: An additional individual
who is both obligated on the loan and is on title to the property.
collateral: In a home loan, the property
is the collateral. The borrower risks losing the property if the loan is
not repaid according to the terms of the mortgage or deed of trust.
collection: When a borrower falls
behind, the lender contacts them in an effort to bring the loan current.
The loan goes
to "collection." As part of the collection effort, the lender
must mail and record certain documents in case they are eventually required
to foreclose
on the property.
commission: Most salespeople earn
commissions for the work that they do and there are many sales professionals
involved in
each transaction, including Realtors, loan officers, title representatives,
attorneys, escrow representative, and representatives for pest companies,
home warranty companies, home inspection companies, insurance agents, and
more.
The commissions are paid out of the charges paid by the seller or buyer in
the purchase transaction. Realtors generally earn the largest commissions,
followed by lenders, then the others.
common area assessments: In some
areas they are called Homeowners Association Fees. They are charges paid
to the Homeowners
Association by the owners of the individual units in a condominium or planned
unit development (PUD) and are generally used to maintain the property and
common areas.
common areas: Those portions of a
building, land, and amenities owned (or managed) by a planned unit development
(PUD)
or condominium project's homeowners' association (or a cooperative project's
cooperative corporation) that are used by all of the unit owners, who share
in the common expenses of their operation and maintenance. Common areas include
swimming pools, tennis courts, and other recreational facilities, as well
as common corridors of buildings, parking areas, means of ingress and egress,
etc.
common law: An unwritten body of
law based on general custom in England and used to an extent in some states.
community property: In some states,
especially the southwest, property acquired by a married couple during their
marriage is considered to be owned jointly, except under special circumstances.
This is an outgrowth of the Spanish and Mexican heritage of the area.
comparable sales: Recent sales of
similar properties in nearby areas and used to help determine the market
value of a
property. Also referred to as "comps."
condominium: A type of ownership
in real property where all of the owners own the property, common areas and
buildings
together, with the exception of the interior of the unit to which they have
title. Often mistakenly referred to as a type of construction or development,
it actually refers to the type of ownership.
condominium conversion: Changing
the ownership of an existing building (usually a rental project) to the condominium
form of ownership.
condominium hotel: A condominium
project that has rental or registration desks, short-term occupancy, food
and telephone
services, and daily cleaning services and that is operated as a commercial
hotel even though the units are individually owned. These are often found
in resort areas like Hawaii.
construction loan: A short-term,
interim loan for financing the cost of construction. The lender makes payments
to the
builder at periodic intervals as the work progresses.
contingency: A condition that must
be met before a contract is legally binding. For example, home purchasers
often include a contingency that specifies that the contract is not binding
until
the purchaser obtains a satisfactory home inspection report from a qualified
home inspector.
contract: An oral or written agreement
to do or not to do a certain thing.
conventional mortgage: Refers to
home loans other than government loans (VA and FHA).
convertible ARM: An adjustable-rate
mortgage that allows the borrower to change the ARM to a fixed-rate mortgage
within a specific time.
cooperative (co-op): A type of multiple
ownership in which the residents of a multiunit housing complex own shares
in the cooperative corporation that owns the property, giving each resident
the right to occupy a specific apartment or unit.
cost of funds index (COFI): One
of the indexes that is used to determine interest rate changes for certain
adjustable-rate
mortgages. It represents the weighted-average cost of savings, borrowings,
and
advances of the financial institutions such as banks and savings & loans,
in the 11th District of the Federal Home Loan Bank.
credit: An agreement in which a borrower
receives something of value in exchange for a promise to repay the lender
at a later date.
credit history: A record of an individual's
repayment of debt. Credit histories are reviewed my mortgage lenders as one
of the underwriting criteria in determining credit risk.
creditor: A person to whom money
is owed.
credit report: A report of an individual's
credit history prepared by a credit bureau and used by a lender in determining
a loan applicant's creditworthiness.
credit repository: An organization
that gathers, records, updates, and stores financial and public records information
about the payment records of individuals who are being considered for credit.
| A | B | C | D | E | F | G | H | I | J | K | L | M | N | O | P | Q | R | S | T | U | V | W | X | Y | Z |
D
debt: An amount owed to another.
deed:The legal document conveying
title to a property.
deed-in-lieu: Short for "deed in lieu of foreclosure," this
conveys title to the lender when the borrower is in default and wants to
avoid foreclosure. The lender may or may not cease foreclosure activities
if a borrower
asks to provide a deed-in-lieu. Regardless of whether the lender accepts
the deed-in-lieu, the avoidance and non-repayment of debt will most likely
show on
a credit history. What a deed-in-lieu may prevent is having the documents
preparatory to a foreclosure being recorded and become a matter of public
record.
deed of trust: Some states, like
California, do not record mortgages. Instead, they record a deed of trust
which is essentially
the same thing.
default: Failure to make the mortgage
payment within a specified period of time. For first mortgages or first trust
deeds, if a payment has still not been made within 30 days of the due date,
the loan is considered to be in default.
delinquency: Failure to make mortgage
payments when mortgage payments are due. For most mortgages, payments are
due on the first day of the month. Even though they may not charge a "late fee" for
a number of days, the payment is still considered to be late and the loan
delinquent. When a loan payment is more than 30 days late, most lenders report
the late payment
to one or more credit bureaus.
deposit: A sum of money given in
advance of a larger amount being expected in the future. Often called in
real estate
as an "earnest money deposit."
depreciation: A decline in the value
of property; the opposite of appreciation. Depreciation is also an accounting
term which shows the declining monetary value of an asset and is used as
an expense to reduce taxable income. Since this is not a true expense where
money
is actually paid, lenders will add back depreciation expense for self-employed
borrowers and count it as income.
discount points: In the mortgage
industry, this term is usually used in only in reference to government loans,
meaning
FHA and VA loans. Discount points refer to any "points" paid in addition to the one percent loan origination fee. A "point" is
one percent of the loan amount.
down payment: The part of the purchase
price of a property that the buyer pays in cash and does not finance with
a mortgage.
due-on-sale provision: A provision
in a mortgage that allows the lender to demand repayment in full if the borrower
sells the property that serves as security for the mortgage.
| A | B | C | D | E | F | G | H | I | J | K | L | M | N | O | P | Q | R | S | T | U | V | W | X | Y | Z |
E
earnest money deposit: A
deposit made by the potential home buyer to show that he or she is serious
about buying
the house.
easement: A right of way giving persons
other than the owner access to or over a property.
effective age: An appraiser’s estimate
of the physical condition of a building. The actual age of a building may
be shorter or longer than its effective age.
eminent domain: The right of a government
to take private property for public use upon payment of its fair market value.
Eminent domain is the basis for condemnation proceedings.
encroachment: An improvement that
intrudes illegally on another’s property.
encumbrance: Anything that affects
or limits the fee simple title to a property, such as mortgages, leases,
easements, or restrictions.
Equal Credit Opportunity Act (ECOA): A
federal law that requires lenders and other creditors to make credit equally
available without discrimination based on race, color, religion, national
origin, age, sex, marital status, or receipt of income from public assistance
programs.
equity: A homeowner's financial interest
in a property. Equity is the difference between the fair market value of
the property and the amount still owed on its mortgage and other liens.
escrow: An item of value, money,
or documents deposited with a third party to be delivered upon the fulfillment
of a condition. For example, the earnest money deposit is put into escrow
until
delivered to the seller when the transaction is closed.
escrow account: Once you close your
purchase transaction, you may have an escrow account or impound account with
your lender.
This means the amount you pay each month includes an amount above what would
be required if you were only paying your principal and interest. The extra
money is held in your impound account (escrow account) for the payment of
items like
property taxes and homeowner’s insurance when they come due. The lender pays
them with your money instead of you paying them yourself.
escrow analysis: Once each year your
lender will perform an "escrow analysis" to make sure they are
collecting the correct amount of money for the anticipated expenditures.
escrow disbursements: The use of
escrow funds to pay real estate taxes, hazard insurance, mortgage insurance,
and other
property expenses as they become due.
estate: The ownership interest of
an individual in real property. The sum total of all the real property and
personal
property owned by an individual at time of death.
eviction: The lawful expulsion of
an occupant from real property.
examination of title: The report
on the title of a property from the public records or an abstract of the
title.
exclusive listing: A written contract
that gives a licensed real estate agent the exclusive right to sell a property
for a specified time.
executor: A person named in a will
to administer an estate. The court will appoint an administrator if no executor
is named. "Executrix" is the feminine form.
| A | B | C | D | E | F | G | H | I | J | K | L | M | N | O | P | Q | R | S | T | U | V | W | X | Y | Z |
F
Fair Credit Reporting Act: A
consumer protection law that regulates the disclosure of consumer credit
reports by consumer/credit reporting agencies and establishes procedures
for correcting
mistakes on one's credit record.
fair market value: The highest price
that a buyer, willing but not compelled to buy, would pay, and the lowest
a seller, willing but not compelled to sell, would accept.
Fannie Mae (FNMA): The Federal National
Mortgage Association, which is a congressionally chartered, shareholder-owned
company that is the nation's largest supplier of home mortgage funds. For
a discussion of the roles of Fannie Mae, Freddie Mac (FHLMC), and Ginnie
Mae
(GNMA), see the Library.
Fannie Mae's Community Home Buyer's Program: An
income-based community lending model, under which mortgage insurers and Fannie
Mae offer flexible underwriting guidelines to increase a low- or moderate-income
family's buying power and to decrease the total amount of cash needed to
purchase a home. Borrowers who participate in this model are required to
attend pre-purchase
home-buyer education sessions.
Federal Housing Administration (FHA): An
agency of the U.S. Department of Housing and Urban Development (HUD). Its
main activity is the insuring of residential mortgage loans made by private
lenders.
The FHA sets standards for construction and underwriting but does not lend
money or plan or construct housing. top)
fee simple: The greatest possible
interest a person can have in real estate.
fee simple estate: An unconditional,
unlimited estate of inheritance that represents the greatest estate and most
extensive interest in land that can be enjoyed. It is of perpetual duration.
When the real estate is in a condominium project, the unit owner is the exclusive
owner only of the air space within his or her portion of the building (the
unit) and is an owner in common with respect to the land and other common
portions of the property.
FHA mortgage: A mortgage that is
insured by the Federal Housing Administration (FHA). Along with VA loans,
an FHA loan
will often be referred to as a government loan.
firm commitment: A lender’s agreement
to make a loan to a specific borrower on a specific property.
first mortgage: The mortgage that
is in first place among any loans recorded against a property. Usually refers
to the date in which loans are recorded, but there are exceptions.
fixed-rate mortgage: A mortgage in
which the interest rate does not change during the entire term of the loan.
fixture: Personal property that becomes
real property when attached in a permanent manner to real estate.
flood insurance: Insurance that compensates
for physical property damage resulting from flooding. It is required for
properties located in federally designated flood areas.
foreclosure: The legal process by
which a borrower in default under a mortgage is deprived of his or her interest
in
the mortgaged property. This usually involves a forced sale of the property
at public auction with the proceeds of the sale being applied to the mortgage
debt.
401(k)/403(b): An employer-sponsored
investment plan that allows individuals to set aside tax-deferred income
for retirement or emergency purposes. 401(k) plans are provided by employers
that
are private corporations. 403(b) plans are provided by employers that are
not for profit organizations.
401(k)/403(b) loan: Some administrators
of 401(k)/403(b) plans allow for loans against the monies you have accumulated
in these plans. Loans against 401K plans are an acceptable source of down
payment for most types of loans.
| A | B | C | D | E | F | G | H | I | J | K | L | M | N | O | P | Q | R | S | T | U | V | W | X | Y | Z |
G
government loan (mortgage): A
mortgage that is insured by the Federal Housing Administration (FHA) or
guaranteed by the Department of Veterans Affairs (VA) or the Rural Housing
Service (RHS).
Mortgages that are not government loans are classified as conventional
loans.
Government National Mortgage Association (Ginnie Mae):
A government-owned corporation within the U.S. Department of Housing and
Urban Development (HUD). Created by Congress on September 1, 1968, GNMA
performs the same role as Fannie Mae and Freddie Mac in providing funds
to lenders
for
making home loans. The difference is that Ginnie Mae provides funds for
government loans (FHA and VA)
grantee: The person to whom an
interest in real property is conveyed.
grantor: The person conveying an
interest in real property.
Next
| A | B | C | D | E | F | G | H | I | J | K | L | M | N | O | P | Q | R | S | T | U | V | W | X | Y | Z |
If you don't find the legal term you seek... this is THE source... Look
It Up!
Equal
Access
is not a law firm, nor does it provide legal
advice. Suitable legal counsel can be arranged if desired.
